May 1996, Volume 2, Number 2

NAFTA and US Agriculture

In 1994, the US exported farm commodities worth $5.5 billion to
Canada and $4.5 billion to Mexico-- agricultural exports to Mexico
fell to $3.3 billion in 1995, about the same level as 1993.

NAFTA split the agricultural community in 1993, with most
commodity groups supporting free trade with Mexico. The Florida
vegetable industry was the most outspoken agricultural opponent of
NAFTA.

Florida grows most of its vegetables from October through June,
and historically accounted for 45 to 50 percent of the roughly four
billion pounds of six major fresh vegetables--tomatoes, bell peppers,
cucumbers, eggplant, snap beans, and squash-- sold during these
months. Mexico usually supplies about 35 percent of these fresh
winter vegetables, and California the remainder.

Most of the year-to-year fluctuation in Florida and Mexico market
shares has been due to weather, but in December 1994, the Mexican
peso was devalued. The tariff on imported tomatoes fell from $0.014
per pound before NAFTA to $0.01 per pound on January 1, 1994.

The commodity in the trade spotlight in 1996 is tomatoes--80
Florida tomato growers produce about 1.6 billion pounds or $400
million worth of tomatoes from 50,000 acres annually, indicating that
most are large businesses, averaging $50 million each in tomato
sales.

Four big "family" farms dominate the Florida tomato
industry--DeMare, Gargiulo, Heller, and Esformes-- together they
account for half of Florida's tomato sales. Calgene bought the
Gargiulo farm for $108 million in 1995. Some Florida producers are
national suppliers of tomatoes, marketing e.g., Mexican tomatoes west
of the Mississippi river.

Florida expanded both tomato acreage and yields in the 1980s.

Mexico plants about 20,000 acres of tomatoes for export to the US,
and imports from Mexico are typically worth about $150 to $200
million each year. Many of Mexico's tomatoes bound for the US are
produced in cooperation with California growers.

Mexico's export-oriented vegetable industry is centered in
Sinaloa, about 600 miles south of the US border. Large farms there
employ about 170,000 Mexican workers for four to five months. Most of
these seasonal workers are migrants: three-fourths migrate to Sinaloa
from other parts of Mexico.

In 1996, typical wages for tomato picking in Sinaloa were reported
to be about $3 -$5 per day, and children often join their parents in
the fields. Most Mexican vegetable exporters provide housing in 125
camps in the Culican Valley at no charge to their harvest workers,
often 150 square feet for each family, which can range six to 10
family members. Government doctors visit the camps to dispense basic
medicines and to teach techniques of birth control; however, the
schools in the camps teach from 5 to 8 PM, so that children can help
their parents in the fields..

Florida growers argue that they need to get at least $8 per 25
pound box--they estimate their cost of production to be about 32
cents per pound. In February 1996, Mexican tomatoes were selling in
the US for $5 per box, the estimated cost of production in Mexico. In
mid-March, 1996, tomato prices jumped to $25 per carton.

Florida claims that its share of the winter vegetable market has
fallen from two-thirds to one-third because of unfair competition. In
March 1996, it filed suit, claiming that Florida tomato growers had
been injured by Mexican tomato imports. One Florida article noted the
apparent irony in Florida lobbying hard to reduce imports of Mexican
tomatoes and other vegetables, while advocating a new guest worker
program.

In response to Florida grower protests, the US government has
taken three steps that have the effect of slowing the implementation
of NAFTA's free trade provisions with Mexico. The Clinton
administration indefinitely postponed cross-border trucking, proposed
to shift to a weekly measure of Mexican tomato imports--if Mexican
shipments exceeded a weekly quota, a 2.5 percent tariff would be
levied, and supported efforts to define Florida winter vegetables as
an "industry" so that growers there can more easily petition for
relief from trade injury.

Under the usual interpretation of trade rules, Florida growers
would have to show that the entire US tomato industry, not just the
seasonal Florida tomato industry, was injured by increased imports to
take action against Mexican tomato imports. By re-defining Florida
tomatoes as an industry, it would be easier for Florida growers to
slow Mexican imports during the winter months when Mexico ships
tomatoes to the US. A hearing on the Florida winter vegetable
proposal will be held in April 1996.

These US "protectionist measures" have run into domestic and
international opposition. Mexico says that it is accepting
applications for US truckers who want to operate in Mexico, while
agricultural exporters of grains and meat to Mexico oppose the weekly
tariff quotas and the re-definition of the Florida vegetable
industry.

In a broader analysis of the likely effects of eliminating
unauthorized aliens from the US farm labor force, Huffman and McCunn
estimate that retail prices would rise more in the summer-fall than
in the winter-spring, because labor shortages that reduced US
production could be offset by imports from Mexico in the winter
spring months. In both cases, supermarket prices would rise very
little--at most, a $1 head of lettuce might rise in price to $1.06,
and, after time for adjustment, the retail price rise would be two or
three cents.

It appears that USDA will permit Mexican avocados to enter 19
northeastern states between November and February, even though 1,700
of the 2,000 comments submitted to USDA opposed the importation of
Mexican avocados.

The California avocado industry took out an ads March 11, 1996
that appealed to President Clinton to block the import of Mexican
avocados to protect "6,000 growers and 21,000 jobs." California has
60,000 acres of avocados, and avocado sales in 1995 were about $225
million.

If permitted, Mexican avocados would enter the US for the first
time since 1914.

The Clinton Administration announced plans to require Florida
sugarcane growers to pay a one or two cent per pound tax on sugar
produced in the southern part of the state to help pay to restore the
Everglades by constructing about 40,000 acres of marshes to filter
agriculture runoff. The US keeps the price of raw sugar at 18 cents
per pound by limiting imports, which translates into a wholesale
price for sugar in the US of about 22 to 24 cents per pound. The US
price is lower than the European price, but above the 12 to 14 cents
per pound world market price.